Nick Clegg's call for tax cuts may save the Lib Dems from annihilation

A very clever move from Nick Clegg this morning – the Deputy Prime Minister has been on all the breakfast shows calling for the tax threshold, currently at £7,475, to be raised to £10,000. It was already Coalition policy to increase it to that level by 2015, but Mr Clegg wants it to hit five figures much faster. If the Government moved next year, that would be equivalent to cutting taxes by around £500 for 23 million people. While ruling out a new mansion tax – a minor obsession of Orange Book Liberals – Mr Clegg says that the policy can be funded by cracking down on the tax evasion and avoidance of the rich. "The UK's tax system cannot go on like this – with those at the top claiming the reliefs, enjoying the allowances, paying other people to find the loopholes while everyone else pays through the nose," he says.

As Tim Montgomerie has realised, this is brilliant positioning from the Lib Dems, and it fits exactly with what Mr Clegg has tried to do with his party since being elected as leader in 2007. For five years, he has sought to drag the Lib Dems back to the centre ground from the Left-wing position Tony Blair had forced it to adopt. That paid off at the election, when the Lib Dems succeeded in cutting into the Tory vote as well as the Labour one, helping to prevent the Conservative majority most commentators had expected. It is only since the disaster of the tuition fees policy (which, ironically, has turned out to be a graduate tax anyway), as well as Mr Clegg's silly decision to hug close to David Cameron, that the Lib Dems have lost ground.

They can recover it – and this proposal for a tax cut shows how. Over the last year, George Osborne has repeatedly attempted to build support for cutting the 50p rate. As he told the Today Programme last summer, "I've said with the 50p rate I don't see that as a lasting tax rate for Britain because it's very uncompetitive internationally, and people, frankly, can move." That may be true, but it sounds like a rich Chancellor, known for taking skiing holidays in Klosters, sticking up for his wealthy mates. Meanwhile, from the Left, Ed Miliband has seemed far too keen on welfare. Just consider the Labour Party's curious indecision over the welfare cap earlier this week. "We support a cap in principle, but not in practice" may be a defensible position, but it sounds an awful lot like "we want to carry on spending on welfare".

In between these two parties, there is the vast, uncolonised territory of those voters earning middle incomes, with aspirations to earn slightly-higher-than-middle incomes. These are the people feeling the pinch – from higher VAT, higher fuel costs, higher rail fares, a weaker pound abroad and much else. This tax cut proposal might be what wins them over. It sounds progressive – lifting the poor out of tax – but mostly benefits those in the middle. If George Osborne has any sense, he will make the policy his own. Although best of luck to him explaining how he will pay for it – £11 billion is a lot to find.